Crypto markets lurched decrease after the Federal Reserve delivered precisely what everybody mentioned they needed: the third straight 25bps minimize to shut out 2025. Santiment’s newest deep dive makes a easy, barely uncomfortable level: retail handled it as a inexperienced mild, whales handled it as exit liquidity.
Bitcoin shortly rallied to $94,044, Ether surged to $3,433, XRP hit $2.10 and Solana managed to achieve $142, however the momentum was short-lived. The BTC value fell by greater than 5% at one level, ETH even fell by greater than 8.5%.
What Brought about The Crypto Market Plunge?
On 11 December, the FOMC confirmed one other quarter-point discount, finishing what Santiment calls the “trifecta of cuts on the finish of 2025.” Decrease charges imply cheaper borrowing, extra risk-taking, and—on paper—a friendlier backdrop for crypto. The Fed nonetheless describes an financial system rising at a “average” tempo with inflation above goal, and in each the October and December conferences it minimize as a result of “the steadiness of dangers (like slowing job development) supported easing coverage.”
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The important thing shift is liquidity. On 29 October, the Fed determined to gradual the discount of its securities holdings from 1 December, easing the tempo of balance-sheet runoff. By 10 December, it went additional, saying financial institution reserves had fallen “an excessive amount of” and asserting renewed purchases of short-term Treasury payments to maintain reserves “ample.” That may be a transfer from shrinking the steadiness sheet to quietly including a reimbursement into the system. As Santiment notes, the Fed remains to be data-dependent however clearly extra keen to lean dovish to guard monetary situations.
Markets, nevertheless, front-ran the story. Prediction platform Polymarket confirmed an “overwhelming quantity of optimism” within the hours earlier than Jerome Powell spoke. On the similar time, on-chain information flagged irregular exercise: @DeFiTracer noticed a whale promoting roughly 100 million {dollars}’ value of Bitcoin inside an hour, triggering “a wholesome mixture of sensationalized panic.” The anticipated final result—one other minimize—arrived, however positioning round it was something however balanced.
Bitcoin’s value response appeared bullish at first. BTC spiked to about $94,044 after the announcement. But Santiment’s social information exhibits that the positive-versus-negative commentary ratio for Bitcoin had already peaked nicely earlier than Powell’s remarks. The gang’s emotional excessive got here in anticipation; when the precise rally hit, merchants had been “fairly modestly reactive” regardless of the transfer to 94K. Sentiment was spent.
Ethereum was worse. Over the identical 24-hour window, ETH surged to round $3,433, and the constructive remark ratio “was a LOT extra fascinating.” Santiment describes “plenty of FOMO after a mini surge instantly after Powell spoke,” with many merchants who purchased the breakout “ultimately [getting] burned when ETH fell again down to three,170.” It’s the textbook “purchase the rumor, promote the information” sample: bullish macro headline, short-term bearish value motion, retail shopping for the spike whereas bigger holders “gladly” offload into the mini-rally.
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Structurally, although, the report will not be outright bearish. Yr-to-date, Santiment notes, Bitcoin is down about 3.6%, versus a 17.6% achieve for the S&P 500 and a putting 61.1% for gold. “It’s fairly the dramatic distinction,” the workforce writes, arguing that “a regression to the imply for BTC can be justified.”
With three cuts now locked in and reserves being topped up through T-bill purchases, the “catch-up” case for crypto versus equities and metals “turns into even stronger.” Traditionally, crypto “has reacted later than equities or commodities when macro developments shift.”
On-chain, so-called sensible cash seems to be performing as if that delayed response is coming. Wallets holding 10–10,000 BTC have added 42,565 Bitcoin since 30 November. What’s “nonetheless [remaining],” Santiment says, is “a notable dump from retail, which might be indicative of the proper recipe for a significant bull run.” For now, they anticipate smaller merchants to “run on fumes from this constructive information of charges getting minimize, for no less than a few days.”
The underside line of the report is intentionally sober. The ultimate FOMC choice of 2025 “reinforces a story of gradual easing, bettering liquidity, and a cautiously supportive atmosphere for threat belongings.”
After a tough yr, “ending the yr with three consecutive fee cuts from the Fed is a powerful signal.” If inflation drifts towards goal and financial information stays steady, Santiment argues, 2026 may lastly give digital belongings “the respiratory room they’ve been ready for.” Simply don’t confuse that with an invite to chase the primary post-Fed spike—as a result of, as this week simply reminded everybody, that’s nonetheless the place crypto vacationers go to get burned.
At press time, the whole crypto market cap was at $3.04 trillion.
Featured picture created with DALL.E, chart from TradingView.com